NiSource in $6 Billion Deal To Acquire Columbia Energy

Published: February 29, 2000

MERRILLVILLE, Ind., Feb. 28—
NiSource, the owner of Indiana's largest utility, agreed today to buy the Columbia Energy Group for $6 billion, ending a pursuit that began with a hostile bid nine months ago.

NiSource will pay $6 billion in cash and securities and assume about $2.5 billion in debt, creating a utility with the most natural gas customers east of the Rocky Mountains.

Columbia shareholders can receive either $70 in cash plus a convertible debt security valued at $2.60 for each share, or $74 in stock. The terms are less attractive than NiSource's October offer of $74 a share in cash, reflecting a decline in utility stocks that led rivals to drop out of the bidding.

''We're disappointed,'' said Nelson Woodard, general manager of Dreman Value Management, which owns 2.58 million Columbia shares. ''It's not surprising considering that utility stock prices have been weak in recent months.''

Mr. Woodard said last summer that he hoped Columbia would sell for $75 to $80 a share. Shares of Columbia rose $2.3125 today, to $59.375, while NiSource fell $2.5625, to $13. The Standard & Poor's utilities index has fallen 21 percent in the last year.

The offer represents a 27 percent premium to Columbia's closing price of $57.0625 on Friday. No more than 30 percent of the price will be paid in stock.

Gary L. Neale, chief executive of NiSource, said the transaction would dilute earnings 10 cents a share in the first year after its completion and add 10 cents a share a year after that. Mr. Neale expects savings of $100 million to $150 million a year.

He said he expected some job cuts in overlapping departments, though he declined to say how many. Each company employs about 8,700 workers. NiSource expects to complete the purchase in six to nine months.

NiSource, based in Merrillville, is buying Columbia to connect its gas utilities in the Midwest and New England. NiSource's Northern Indiana Public Service unit sells gas and electricity to about 660,000 customers in Indiana. NiSource also has about 305,000 gas customers in Maine, New Hampshire and Massachusetts.

Columbia, based in Herndon, Va., sells gas to about two million customers in Ohio, Pennsylvania, Kentucky, Maryland, Virginia and Washington. The company owns about 16,500 miles of interstate gas pipelines running from Louisiana to the Northeast, explores for oil and gas, and sells gas and power to homes and businesses in deregulated markets.

Together, NiSource and Columbia will have 4.1 million gas, electric, propane and water customers in nine states. Revenue will exceed $6 billion a year.